Accounting for Not-for-Profit Organisations
This section covers Accounting for Not-for-Profit Organisations. BSEB tests Receipts and Payments Account, Income and Expenditure Account, Balance Sheet, subscriptions and special funds.
Core rules
- Receipts and Payments Account is a cash-basis summary of all receipts and payments, including capital items. It is not an income statement.
- Income and Expenditure Account is prepared on accrual basis and includes only revenue income and revenue expenses of the current year. Surplus/deficit is transferred to Capital Fund.
- Subscriptions: adjust outstanding and advance subscriptions; only the current year’s subscription is income.
- General donations are revenue income; corpus donations and special-purpose donations are capital receipts, credited to Capital Fund or a special fund. Entrance fees are usually revenue unless treated as capital by the organisation.
Worked example
Subscriptions received ₹1,20,000. This includes ₹10,000 outstanding for the previous year and ₹15,000 advance for next year; ₹5,000 is still outstanding for the current year. Subscription income = 1,20,000 − 10,000 − 15,000 + 5,000 = ₹1,00,000. The ₹10,000 relates to last year, the ₹15,000 is unearned, and the ₹5,000 is accrued income.
Traps
Do not treat purchase of fixed assets or repayment of loans as expenditure in Income and Expenditure Account. Do not include closing cash in income. Do not credit a special donation to general income if it is for a specific purpose. Remember depreciation on fixed assets is an expense even though it is non-cash.